2010 (2) TMI 1076 - HC - VAT and Sales Tax

Whether the Tribunal is justified in holding that metallic gas cylinders are not exigible to levy of entry tax as packing materials falling under notification dated September 23, 1998? Held that - The liquefied petroleum gas cannot be packed in any other manner other than a cylinder. Thus, the intention of the Legislature is to tax metallic gas cylinder which cylinder is manufactured out of steel plates and entry 66 of the First Schedule read with entry 3(ii) of notification dated September 23, 1998 would encompass the description of the items in the class and it is conceivable that containers like steel drums would come within the genus of packing material and species of steel drums and thus exigible to tax. Hence, we are of the opinion that the contention of the learned counsel for the respondent cannot be accepted and accordingly the same is rejected, and the submission made by the Government Advocate deserves to be accepted. In favour of the Revenue

Summary

Issues Involved:
1. Whether metallic gas cylinders are exigible to levy of entry tax as packing materials under the notification dated September 23, 1998.

Issue-wise Detailed Analysis:

1. Whether metallic gas cylinders are exigible to levy of entry tax as packing materials under the notification dated September 23, 1998:

The case revolves around the interpretation of whether metallic gas cylinders used for filling liquefied petroleum gas (LPG) fall under the category of "packing materials" as per the notification dated September 23, 1998, under the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 (KTEG Act).

The respondent, a registered dealer, was engaged in the business of filling LPG in metallic gas cylinders and faced entry tax levied by the assessing authority for the years 1994-95 to 1997-98. The respondent challenged these assessments, leading to a series of appeals and remands between the first appellate authority, the Karnataka Appellate Tribunal, and the Assistant Commissioner, who eventually reaffirmed the entry tax levy. The Karnataka Appellate Tribunal later ruled in favor of the respondent, prompting the Revenue to file the present revision petition.

Arguments by the Revenue:

- The Revenue argued that section 3(1) of the KTEG Act is the charging section, allowing for the levy of entry tax on goods specified in the First Schedule brought into a local area for consumption, use, or sale.
- The relevant entry, according to the State, is entry 66, which includes "packing materials" and specifies a tax rate of 2% for items like steel drums, barrels, and crates.
- The Revenue contended that LPG cylinders, being containers made of steel, fall under the category of "packing materials" and are thus taxable. They emphasized that the words "and the like" in entry 66 should include metallic gas cylinders.

Arguments by the Respondent:

- The respondent argued that metallic gas cylinders are not packing materials and thus should not be taxed under entry 66.
- They pointed out that the Karnataka Sales Tax Act (KST Act) separately defines "containers" under Schedule II, Part C, entry 22, which includes items like steel and aluminum drums but does not list metallic gas cylinders.
- The respondent further argued that since metallic gas cylinders are assigned a separate entry under the KST Act, they should not be included under "packing materials" in the KTEG Act.

Court's Analysis:

- The court examined the relevant provisions of the KTEG Act, including section 3, which outlines the levy of entry tax on specified goods.
- The court noted that "packing materials" serve the purpose of organizing, transporting, and ensuring the safety of goods. The definition of "pack" implies placing items together for transportation, which applies to metallic gas cylinders used for storing LPG.
- The court considered the principle of ejusdem generis, which limits the scope of general words following specific words to the same class or genus. The court found that the words "and the like" in entry 66 extend to items similar to those listed, such as steel drums.
- The court referred to previous judgments, including Maharashtra Hybrid Seeds Company Limited v. State of Karnataka and Siddeshwari Cotton Mills (P.) Ltd. v. Union of India, which support the application of ejusdem generis to interpret the scope of general words.

Conclusion:

The court concluded that metallic gas cylinders, being manufactured from steel plates, fall within the genus of "packing materials" as specified in entry 66 of the First Schedule read with entry 3(ii) of the notification dated September 23, 1998. The court held that the intention of the Legislature was to include metallic gas cylinders within the scope of packing materials subject to entry tax. Accordingly, the revision petition was allowed, and the question of law was answered in favor of the Revenue and against the respondent.